Light at end of the Chunnel

Eurotunnel, the company notorious for missing forecast after forecast, is beating its profit targets at last.

Shares in the Channel Tunnel operator jumped 21/2p to 101p, their highest since the summer of 1996, as it unveiled more-than-trebled operating profits of £184 million last year.

The surplus smashed the "base case" target of £136 million in the 1997 prospectus that accompanied the financial restructuring.

After paying interest, the company still made an underlying net loss of £215 million compared with £611 million in 1997.

A one-off £279 million profit resulting from the restructuring means Eurotunnel was in the black for the first time ever at £64 million.

However, executive chairman Patrick Ponsolle warned that the abolition of duty-free "will undoubtedly have a negative impact on our profitability in the short term", leading to higher ticket prices. Ponsolle added: "We believe that the unfavourable effect of these price increases on traffic volumes and market growth will be of a limited and temporary nature."

His comments came as striking French port workers blockaded the Calais end of the tunnel in protest at the threatened abolition. European finance ministers have been meeting in Brussels today to discuss the issue.

Eurotunnel announced last week that it is handing over control of its highly profitable duty-free shops to airports operator BAA, which will develop alternative retail outlets if the tax perk does go.

Chief financial officer Richard Shirrefs called on EU governments to make their minds up quickly. "It's OK if they decide yes, and it's OK if they decide no; what we don't want is a maybe."

Shirrefs said the improved financial performance was due to cost control, higher volumes and better yields. Total costs rose 9% to £321 million, largely due to an expansion of the terminal shopping areas. Underlying costs were virtually unchanged.

He added that hefty price increases announced in November for this year's brochure are sticking, lifting yields.

Interest was covered 0.69 times by cash flow, up from a like-for-like 0.46 last year and ahead of the prospectus projection of

0.56. Eurotunnel now hopes to achieve full interest cover before the prospectus target of

2003. Revenue rose 26% to £618 million.

The company also unveiled a complex scheme to redeem some £936 million-worth of equity notes, issued as part of the restructuring.

The proposal could yield annual interest savings of up to £45 million and a one-off profit of up to £90 million.